Wednesday, December 11, 2019

A Current AIM Small Cap Equity Holding: Vicor Corporation (VICR, $41.27): “Big Moves Ahead”

 Vicor Corporation (VICR, $41.27): “Big Moves Ahead”
By: Sean Halverson, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


Vicor Corporation. (NYSE:VICR) is a designer of components and power systems that are built to convert, regulate, and control electric currents.

• For the fourth quarter, bookings are expected to be up 30%.

• Company has seen margins around 46 and 47% and expects as the tariff issues continue to get better, management forecasts margin improvement to 50%. 

• Even though a small company, their 48V solution to datacenters are going to prove to be so strong that customers are going move towards.

• With a need for higher GPU potential, Vicor is one of the few players that can deliver a product that can provide supercomputing with a reliable source to enhance performance.

Key points: 

Vicor Corporation is positioned to have a very strong 2020 fiscal year. The company has created a solution for data centers that allows the ability to move MTMs closer to the processor than traditional power suppliers. This enables the data center to experience a much greater reduction in distribution loss of power. The Vicor developments are generating enhanced performance and a more efficient data center.

In regards to the automotive industry, the 48V Vicor solution is allowing for autonomous vehicles to be able to run at a more efficient and higher power level. Additionally, the 48V system is proving to last much longer than the traditional battery supply in electric vehicles. There have been rumors that Volvo was at their plant to view the solution and integrate it into their autonomous systems.
The GPU space is moving rapidly towards a 48V system. Vicor’s 48V system is one that management recognizes can’t be replicated by any competitor. Moving into 2020, Nvidia was looking to hire an individual with Vicor background that can come in and help to implement their findings and expertis. The Vicor solution is still proving to be very much ahead of its peers with this continued Nvidia exposure.

What has the stock done lately?

Since the Q3 earnings release, the stock is up around 26%. The strong release is due to the fact the company is expecting to have a strong Q4 and a quick start to 2020. Management expectations in stronger margins is helping with the growth in stock price.

Past Year Performance: 

Over the past year, Vicor has given shareholders a 27% return. The growth was stunted early in the year because of tariff issues the company was experiencing. Since then, they have moved away from China and into Taiwan. This will prove to be a long-term benefit company and reduce the losses from tariffs the company might experience.

Source: FactSet

My Takeaway
Vicor is a true pure play into the 48V solution being integrated into data centers. The company is still showing strong signs of serious potential as it moves into 2020. Additionally, the management team has been dedicated to the technology and is proving that 48V data centers are the future. Supercomputing is going to become more advanced with their product and is a driver behind the company’s current momentum.

Source: FactSet